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In probability theory and decision theory the St. Petersburg paradox describes a particular lottery game (sometimes called St. Petersburg Lottery) that leads to a random variable with infinite expected value, i.e. infinite expected payoff, but would nevertheless be considered to be worth only a very small amount of money. The St. Petersburg paradox is a classical situation where a naïve decision theory (which takes only the expected value into account) would recommend a course of action that no (real) rational person would be willing to take. continued…

The Post Earnings Announcement Drift anomaly means the tendency for stocks to earn abnormally high returns in the three quarters following a positive earnings announcement, and to earn abnormally low returns in the three quarters following a negative earnings announcement. continued…

Participation may mean sharing something in common with others.

In finance, “participation” is an ownership interest in a mortgage or other loan. In particular, loan participation is a cooperation of multiple lenders to issue a loan (known as participation loan) to one borrower. continued…

Mortgage calculators are used to help a current or potential real estate owner determine how much they can afford to borrow to purchase a piece of real estate. Mortgage calculators can also be used to compare the costs or real interest rates between several different loans, determine the impact on the length of the mortgage loan of making added principal payments or bi-weekly instead of monthly payments. continued…

Maturity refers to the final payment date of a loan or other financial instrument, after which point no further interest or principal need be paid. continued…

Leverage (or gearing) is using given resources in such a way that the potential positive or negative outcome is magnified. In finance, this generally refers to borrowing. If the firm’s return on assets (ROA) is higher than the interest on the loan, then its return on equity (ROE) will be higher than if it did not borrow. On the other hand, if the firm’s ROA is lower than the interest rate, then its ROE will be lower than if it did not borrow. continued…

In finance, the forecast period is the time period in which the individual yearly cash flows are input to the discounted cash flow formula. Cash flows after the forecast period can only be represented by a fixed number such as the compound annual growth rate. There are no fixed rules for determining the duration of the forecast period. This article covers three methods of determining the forecast period. continued…

Future-oriented is a term used in finance and economics to describe agents that discount the future lightly and so have a low discount rate, or equivalently a high discount factor.

Conversely, present-oriented agents discount the future heavily and so have a high discount rate, or equivalently a low discount factor. continued…

A financial transaction involves a change in the status of the finances of two or more businesses or individuals. continued…

Eurodollars are deposits denominated in United States dollars at banks outside the United States, and thus are not under the jurisdiction of the Federal Reserve. Consequently, such deposits are subject to much less regulation than similar deposits within the United States, allowing for higher margins. continued…